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The extension of time limits for commencing arbitration - lessons from the Anglian Water case

Key Points: A court can sometimes extend the time limits for commencing arbitration.

Contracts providing for multi-tiered dispute resolution through distinct stages or "tiers" of dispute resolution processes, culminating in final and binding resolution by arbitration or litigation, often also contain barring provisions. These clauses typically require a party to submit certain notices, in a specified manner, to a specified address and within a specified timeframe.

A failure to comply with the notice requirements may mean that the claimant's right to proceed to arbitration is barred. However, in some circumstances a court, or the tribunal itself, may have the power to extend this time, giving a party the opportunity to proceed on to arbitration despite not strictly meeting the contract's notice requirements.

A recent UK case, Anglian Water Services Ltd and Laing O'Rourke Utilities Ltd [2010] EWHC 1529 (TCC), offers some useful assistance in determining when such an extension is likely to be granted.

We will also examine the positions in Australia under both domestic and international arbitration legislations.

The court's discretion to extend time – the UK position

In the United Kingdom, under section 12 of the Arbitration Act 1996 (England & Wales), a court has the power to extend time for a party to commence arbitral proceedings if it was satisfied, for example, that the conduct of one party makes it unjust to hold the other party to the strict terms of the provision in question.

In effect, this order revives a cause of action which has become barred by the expiration of the period fixed by contract.

Anglian Water Services case

In a contract entered into between Anglian Water Services Ltd and Laing O'Rourke Utilities Limited (LOR), certain disputes were referred to adjudication. The parties' solicitors exchanged communications on behalf of their clients and LOR's solicitors confirmed that they would accept service of documentation "relevant to the adjudication".

The contract required a party who was dissatisfied with an adjudicator's decision to notify the other party of its intention to refer a dispute to arbitration within four weeks of the adjudicator's decision. Without that notice, the matter was not referrable to arbitration.

As Anglian Water was dissatisfied with the adjudicator's decision it instructed its solicitors to send LOR's solicitors a facsimile advising them of its dissatisfaction, together with a separate, formal Notice to Refer the dispute to Arbitration as was required under the contract.

LOR's solicitors responded confirming the receipt of the facsimile and forwarded the letter and the "Notice to Refer" to the individuals at LOR who were handling the matter.

In dispute was whether:

Anglian had validly notified its intention to refer a dispute to arbitration; and, if it did not

whether it was entitled to an extension of time for taking that step until such a date as the court may permit, pursuant to section 12 of the Act.

Valid notification

The court found that Anglian had validly notified its intentions to refer the dispute to arbitration. LOR's solicitors had confirmed that they would accept service of documentation "relevant to the adjudication" and the court found that the notice was "relevant to the adjudication", since the notice (served in time) prevented the adjudicator's decision from being final.

The court further concluded that where the contractual provision on communications and notices is of general application, regardless of the particular issue being notified, then the mode of delivery or other requirements specified in the contract is the only means of achieving or securing effective delivery of a communication under the contract. Accordingly, if it required documents to be sent to a particular address, then that must be strictly complied with.

The facts were distinguished from other cases where the communication was effective when made in ways other than those specified in particular contracts, in circumstances:

where the other modes of communication were no less advantageous to the party;

where the contract specified notices to be sent by "prepaid registered mail", but other equally expeditious means of provision for service are acceptable, provided there is no clear indication of a contrary intention; or

depending on whether the provision is "mandatory or directory", in other words whether it is to be fulfilled strictly to the letter or whether the substance of it is enough.

In each of the above scenarios, the specified method of service was in respect of a specific dealing. In this case however, where the method of service was of general application, the court found that it would be unsatisfactory for the parties to investigate the circumstances in which the communication was made or received so as to determine whether the particular mode of delivery was equivalent. The specified means of delivery must be strictly adhered to.

Entitlement to an extension of time

The court also examined whether LOR's conduct had somehow caused Anglian to fail to give notice in the specified time. The court held that LOR's solicitors' conduct was a material cause of Anglian's failure to send the notice to the right address. Given that the notice was actually received by the relevant individuals at LOR, the court would exercise its discretion to grant the necessary extension of time.

Australian position

In Australia, for domestic arbitrations under section 48 of the uniform Commercial Arbitration Acts, with the exception of the New South Wales Act which was replaced by the Commercial Arbitration Act 2010 (NSW), the courts have a similar discretion to those of the English courts to extend the time for commencement of arbitration where such has been fixed by the agreement between the parties.

In the High Court case of PMT Partners v Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 184 CLR 301, it was held that section 48 of the Commercial Arbitration Act gives the court the power to relax the time limits which might otherwise prevent or interfere with the fair and proper processes of arbitration, and that the section's wording "in or in relation to an arbitration" should be construed liberally.

In most jurisdictions, a court cannot make an order extending time under the Commercial Arbitration Act unless it is satisfied that in the circumstances of the case undue hardship would otherwise be caused. While the provision is worded differently to its equivalent in the UK Act, ultimately, cases in Australia suggest that the courts will look at all the relevant circumstances of the particular case and may take into account factors including:

length of the delay;

the amount at stake;

whether the delay was the claimant's fault;

whether the claimant was misled by the other party; or

whether the other party has been prejudiced by the delay.

The recently revised Commercial Arbitration Act 2010 (NSW) and the International Arbitration Act 1974 (Cth) contain no equivalent provision to section 48 allowing courts to extend the time limit for the commencement of arbitration proceedings, or any prior steps in the process. In fact, article 5 of the UNCITRAL Model Law on Arbitration, which is adopted by both Acts, significantly limits any court intervention in arbitral proceedings to those purposes which are expressly provided for under the Acts.

Conclusion

What can be learned from the Anglian Water case:

it is important to strictly adhere to the notice and communications requirements in your contract;

where solicitors purport to have authority to accept service of notices required under the contract, take steps to confirm the scope of that authority; and

the effects of barring provisions in contracts may be overcome in certain circumstances, and currently in most jurisdictions (apart from NSW) courts may have the power to extend time for the matter to proceed to arbitration.

Given that extension of time will not always be available, the best position to be is to ensure notices are issued in a compliant manner so as to avoid putting yourself in a position which requires an application to extend time.